Accra: The Monetary Policy Committee (MPC) of the Bank of Ghana has announced a reduction in the policy rate by 300 basis points, bringing it down to 25 percent from the previous 28 percent. Dr. Johnson Pandit Asiama, the Governor of the Bank of Ghana, communicated this decision at a press briefing following the conclusion of the MPC's 125th regular meetings in Accra. He noted that the decision was influenced by notable improvements in the nation's economic landscape.
According to Ghana News Agency, Dr. Asiama highlighted that macroeconomic conditions have improved significantly, with inflation expectations broadly anchored and external buffers strengthened, leading to a resurgence of confidence in the economy. The July forecast indicates that headline inflation is anticipated to decline further in the third quarter of 2025 and align with the medium-term target of 8±2% by the end of 2025, earlier than initially projected.
Despite potential upward risks to the inflation outlook, such as supply chain challenges from global trade tensions and possible increases in utility tariffs, these are expected to be mitigated by a tight monetary policy stance and ongoing fiscal consolidation. Dr. Asiama emphasized that the Committee would continue to evaluate incoming data and may consider further reductions in the policy rate if the disinflation trend persists.
The Committee remains steadfast in its commitment to price stability while fostering conditions conducive to inclusive and sustainable growth. During the meetings, recent economic developments and risks to the inflation outlook were thoroughly assessed. Despite slower growth prospects, the pace of disinflation has moderated, with financial conditions remaining restrictive, potentially impacting emerging markets and developing economies. However, improved domestic macroeconomic conditions are expected to alleviate risks from the global economy.
On the domestic front, the economy demonstrated resilience in the first quarter of 2025, achieving an annual GDP growth of 5.3 percent, up from 4.9 percent in the same period of the previous year, driven by increased activity in the agriculture and services sectors. Excluding oil, the economy grew by 6.8 percent compared to 4.3 percent over the same comparative period. High-frequency real sector indicators point to a sustained pickup in economic activity beyond the first quarter.
Recent business and consumer confidence surveys reflect improved sentiments, buoyed by easing inflationary pressures and strong optimism regarding economic conditions. Since the last MPC meeting, headline inflation has further declined to 13.7 percent in June 2025 from 18.4 percent in May, marking the lowest level since December 2021. This deceleration is attributed to the tight monetary policy stance, fiscal consolidation, easing food supply constraints, and the robust recovery of the cedi.
The growth in monetary aggregates remained subdued during the first half of the year, primarily due to the tight monetary policy stance, strong liquidity management, and reduced government borrowing. In line with the disinflation process and easing inflation expectations, interest rates at the short end of the money market have declined sharply, reducing the cost of government borrowing.
The banking sector's Financial Soundness Indicators demonstrate continued asset growth, improved solvency, liquidity, profitability, and efficiency in the first half of the year. The ongoing recapitalization efforts, coupled with strict credit underwriting standards, are expected to enhance resilience in the banking sector.
The external sector has shown significant improvement, with a record current account surplus of US$3.4 billion in the first half of 2025, supported mainly by higher prices and increased production volumes of gold and cocoa. The sector's outlook remains positive, anchored on favorable commodity prices and improved remittance inflows, despite the resumption of external debt service.
The strong performance of the external sector and increased reserve accumulation have further strengthened the cedi against major trading currencies. As of July 25, 2025, the cedi appreciated by 40.7% against the US dollar, 31.2% against the British pound, and 24.2% against the euro.